Correlation Between Prudential High and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Prudential High and Sterling Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prudential High and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential High Yield and Sterling Capital Special, you can compare the effects of market volatilities on Prudential High and Sterling Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prudential High with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Sterling Capital.
Diversification Opportunities for Prudential High and Sterling Capital
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Sterling is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Sterling Capital Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Special and Prudential High is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prudential High Yield are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Special has no effect on the direction of Prudential High i.e., Prudential High and Sterling Capital go up and down completely randomly.
Pair Corralation between Prudential High and Sterling Capital
Assuming the 90 days horizon Prudential High is expected to generate 31.74 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Prudential High Yield is 7.51 times less risky than Sterling Capital. It trades about 0.08 of its potential returns per unit of risk. Sterling Capital Special is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,078 in Sterling Capital Special on September 1, 2024 and sell it today you would earn a total of 208.00 from holding Sterling Capital Special or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential High Yield vs. Sterling Capital Special
Performance |
| Timeline |
| Prudential High Yield |
| Sterling Capital Special |
Prudential High and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Sterling Capital
The main advantage of trading using opposite Prudential High and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Sterling Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Prudential High vs. Boston Partners Small | Prudential High vs. Pace Smallmedium Value | Prudential High vs. Lord Abbett Small | Prudential High vs. Mid Cap Value Profund |
| Sterling Capital vs. Ab Value Fund | Sterling Capital vs. Eic Value Fund | Sterling Capital vs. Artisan Thematic Fund | Sterling Capital vs. Small Cap Stock |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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